Unit 3 Business Finance - Cash flow and Breakeven

Label the break-even chart

a

b

c

d

e

Total Costs

Fixed Costs

Margin of Safety

Total Revenue

Cash Flow

Break-even point

Contribution Per Unit

Match the Break-even formulas up

• Fixed Costs / Contribution Per Unit

• Contribution per Unit

• Selling Price – Variable Costs Per Unit

• Total Revenue

• Selling Price x Quantity Sold

• Break-even Point

• Contribution Per Unit x Margin of Safety

• Variable Cost Per Unit

• (Total Costs – Fixed Costs) / Break-even

• Profit

Sort the fixed costs, variable costs and sales into the columns

Groups:

(a) Fixed Costs

,

(b) Variable Costs

,

(c) Sales

• Cash Sales

• Credit Sales

• Rent

• Raw Materials

• Overtime Pay

• Salary

A tennis coach offers hourly one to one lessons for £25.50. Their total fixed costs are £14985 and the variable costs per lesson are £5.25. Calculate the number of lessons (output) they need to break-even.

Answer explanation

Formula = total fixed costs/contribution per unit

The number of lessons to break-even each year =

£14 985 / (£25.50 - £5.25) = 740 lessons

Sort the inflows and the outflows

Groups:

(a) Inflows

,

(b) Outflows

• sale of assets

• Credit purchases

• cash sales

• Rates

• loans

• Wages

• capital introduced

• Utilities

What L measures the ability of a business to pay its short-term debts.

What is the net cash flow in January?

What is the closing balance in January?

What is the opening balance in February?

What is the closing balance in February?